With all attention on the Presidential race, races and questions lower on the ballot are getting much less attention than they might otherwise. That’s especially true here in Massachusetts, where a whopper of a ballot initiative, Question 1, threatens to blast a hole in the State’s finances. For those of you who haven’t yet heard of Question 1 should familiarize yourself – in a hurry.
The text of Question 1 is fairly straight forward — voting “yes” would reduce the state personal income tax rate to 2.65% for all categories of taxable income for the tax year beginning on or after January 1, 2009, and would eliminate the tax for all tax years beginning on or after January 1, 2010. A “no” vote leaves the state income tax unchanged.
The question, which was put on the ballot by libertarian Carla Howell, Chairwoman of The Committee For Small Government and is similar to a previous proposal that failed but attracted significant support at the polls. Howell and supporters claim — without citing specifics — that removing the personal income tax, which would translate to an average savings of $3,700 for state taxpayers, and slash state revenues by approximately 40%, would “create hundreds of thousands of new Massachusetts jobs” while not raising property taxes or other taxes and that it wouldn’t require cuts to essential government services.
That last assertion is vigorously disputed by pretty much everyone who works in government at the state or local level. Opponents note that:
The $12 billion in lost revenue goes to support, among other things, critical services such as public safety (fire, police, paramedics), education, infrastructure improvement (roads and bridges), and healthcare for the sick and disabled and the elderly. In other words, the money would need to be replaced, or those critical services would be sacrificed — unsafe streets, crumbling bridges, crowded and ineffective classrooms, you name it.
State leaders and even fiscally conservative groups like the nonpartisan Massachusetts Taxpayers Foundation argue that put this Passage of the ballot question to repeal the state’s income tax would be a disaster, requiring spending cuts of more than 70 percent in almost all state programs. Those include: human services programs, transportation, state parks and environmental programs, UMass and other community colleges, state employee pensions and health benefits, the prison system and courts. Mass Taxpayers also points out, in a recent press release, that well-off taxpayers would get most of the benefits from repealing the income tax: those earning more than $100,000 would save $16,295 (MTF says that’s 14 percent of taxpayers), compared to $850 for those earning less than $50,000 (65 percent of taxpayers, according to MTF). In other words, the $3,700 cited by proponents masks how the benefits would be skewed towards the wealthiest citizens in the state. MTF also raises alarms about the blowback should this bill pass, including a loss in capital investments on transportation, higher ed and economic development that fuel future growth, and a plummeting bond rating.
As many state leaders have pointed out, the State simply couldn’t afford to get rid of all that money and still function, given mandated state spending in other areas. The result is that other sources of income would need to be raised — with local property taxes and other fees and taxes leading the way. Massachusetts might have to get rid of its tax exemptions on food and clothing, as an example. Like it or not, our current state income tax is progressive, levying the heaviest burden on those who can afford to pay it. Question 1 and the workarounds it would inspire would be largely regressive: affecting the poor and vulnerable far more than the wealthy.
In short, Question 1 is a gimmick — it’s a ham fisted and poorly thought out effort to “make a point” to those hated bureaucrats on Beacon Hill, consequences be damned. As MTF notes, the state could fire all 68,000 people in its employ and still save only $5b, leaving $7b left to cut.
Anyone who has followed the annual budget debates in town knows how important State Aid is. And, while its true that we might pay more out in taxes than we get back, we’re not an island here in Belmont that can “go it alone.” We rely on a a common infrastructure and a network of state and federal programs, as well as a business climate that supports a steady flow of investment and commerce to Massachusetts and surrounding communities. Major corporations don’t look for cute little towns to invest in — they’re looking at states that are encouraging innovation, producing educated workers and building an infrastructure to support and encourage commerce. Your tax dollars make that possible. As an example, if Wyeth locates a new pharma facility in Cambridge, that’s good for us, even if we don’t get the tax revenue from the plant: Wyeth employees settle down in Belmont, they contribute to our community and have money to shop in our stores.
It’s crazy that, in 2008, with developing countries like China and India investing massively in their infrastructure and sucking precious manufacturing and high tech jobs away we’ve got to keep making this argument and watching out for the fiscal Luddites like Ms. Howell, but so it is. We can’t go backwards. We’ve got to move forwards — fighting waste, abuse and corruption in the way the state spends its money, while also channeling tax dollars into areas that will pay dividends in the future: infrastructure, education, and the development of industries like medicine, biotech, greentech. Question 1 would put an end to all that, leaving each town to, in essence, fend for itself. In short: Question 1 is bad for Belmont, bad for Massachusets and bad for our future. Vote “No.”